Nigeria’s Economy Gets a Boost: Inflation Rate to Decline Again in 2025?

Economic expert Dr. Muda Yusuf anticipates a further decrease in Nigeria’s inflation rate by 2025. This forecast is grounded in a blend of government initiatives and enhancing macroeconomic conditions. As of February 2025, the inflation rate in Nigeria has already fallen to 23.18%, a reduction from 24.1% in January 2025 and 24.48% in January 2024.

Dr. Yusuf identifies two key factors contributing to the current easing of inflation: the base effect and enhanced macroeconomic stability. The base effect involves comparing the 2025 figures to the significantly high prices observed in 2024, a trend expected to persist throughout much of 2025. The signs of improved macroeconomic stability are reflected in the reduced volatility of the exchange rate.

Nevertheless, despite this decline, a significant number of Nigerians express doubts regarding the reliability of the inflation statistics. Critics contend that the reported decrease in inflation does not correspond with the prices of goods and services, as essential items such as rice, cement, and transportation continue to be expensive.

The National Bureau of Statistics (NBS) has also indicated a reduction in food inflation, which was recorded at 23.51% in February 2025, down from 37.92% in February 2024. Additionally, the average prices of food items, including yam tubers, potatoes, and soybeans, have seen a decline.

According to the NBS, the urban inflation rate was 24.47% in February 2025, a decrease from 25.43% in January 2025. Similarly, the rural inflation rate fell to 22.14% in February 2025, down from 22.85% in January 2025.

Furthermore, the Central Bank of Nigeria (CBN) has reported a reduction in the growth rate of the money supply, which was 14.15% in January 2025, compared to 15.35% in December 2024. This decline is anticipated to further alleviate inflationary pressures.

In a recent report, the International Monetary Fund (IMF) also projected a decline in Nigeria’s inflation rate, citing the country’s efforts to improve its monetary and fiscal policies. The IMF projected that Nigeria’s inflation rate would decline to 20% by the end of 2025.

Long term implications of the decline

The anticipated reduction in Nigeria’s inflation rate is likely to yield numerous long-term effects on the economy. A primary advantage is the enhancement of consumers’ purchasing power, allowing individuals to acquire more goods and services with the same amount of money. This increase in consumer spending can positively influence economic growth. Moreover, a consistent inflation rate is likely to draw foreign investors, as it diminishes the uncertainties linked to investments, thereby fostering an increase in foreign direct investment.

Furthermore, a decrease in the inflation rate may contribute to alleviating poverty, as low-income households experience an increase in their purchasing power. This improvement can enhance living standards and mitigate issues related to poverty. Additionally, a stable inflation rate can promote savings, as the value of money remains intact over time. This increase in domestic savings can subsequently be directed towards investments, further supporting economic growth.

An improved macroeconomic landscape can also stimulate business investments, thereby contributing to economic expansion. A stable inflation rate enhances Nigeria’s economic competitiveness by lowering the cost of doing business, making the country more appealing to foreign investors. Furthermore, maintaining a stable inflation rate can foster better fiscal discipline, as the government is motivated to uphold a stable macroeconomic environment, thereby reducing the likelihood of fiscal irresponsibility.

Overall, while the decline in inflation is a positive development, it’s essential to address the underlying causes of inflation to ensure long-term economic stability. The government’s policies and interventions, such as the Central Bank of Nigeria’s monetary tightening measures and fiscal interventions, will play a crucial role in shaping future inflation trends.